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High/Low: Is There Now Reasonable Agreement on the Costs and Benefits of Waxman-Markey?

Supporters of the Waxman-Markey climate bill have not seriously disputed the extreme costs and the negligible benefits estimated by critics of the cap-and-trade proposal.  I must confess that I was expecting a real fight, but some very important markers seem to have been laid down in this legislative debate. Waxman-Markey supporters are going beyond the math to dispute the conclusion being drawn from the math. And that conclusion, which logically follows, is that cap-and-trade for carbon dioxide is a very bad deal.

Costs: Congressional Republicans claimed that the Waxman-Markey cap & trade bill would push up prices for the typical U.S. household more than $3,100 annually.  As I explain here, the MIT economist who thinks the $3,100 figure is bogus concedes that consumers will ultimately pay (in the form of higher prices) for any auction revenues collected by the government.  He just refuses to call that a net cost since the government can do something useful with the revenue (such as cut income taxes, fill potholes, etc.).

Benefits: The climate scientists at RealClimate have not challenged Chip Knappenberger’s calculation that Waxman-Markey would alter the global temperature by 9/100ths of a degree F in 2050, the year when the full 83 percent cutback in greenhouse-gas emissions is in force.  (This avoided warming leaves 97% of the anthrogopenic warming, hardly a start under any activist’s math.)  No one is disputing Knappenberger’s figure–I encourage the reader to skim the discussion at RealClimate–they are merely saying that the U.S. needs to show leadership in order to prod other countries to cap their own emissions.

All Pain/No Gain: So we see that some of the most vehement supporters of cap-and-trade–and the most critical comments on Knappenberger’s analysis at MasterResource–agree that the Waxman-Markey bill would raise prices for households by some $3,100 per year, and would at best avert 9/100ths of a degree in global warming. (Joe Romm’s assertion that cap-and-trade has huge benefits and negligible costs will be the subject of my next post.)

To repeat, this was a surprising, unexpected turn of events in the cap-and-trade debate.  I fully expected proponents of Waxman-Markey to claim that households would see only modest increases in energy prices, and that faithful adherence to the emissions reductions mandated by the proposed legislation would avert serious climate change.

But some of the most credentialed and respected supporters of cap & trade are not saying this at all.  They agree with the numbers: Waxman-Markey would cost households $3,100 in higher prices per year (possibly offset through truly productive government spending and/or tax relief), in exchange for a world which warms 9/100ths of a degree less by 2050 than it otherwise would.

10 comments

1 David Douglas { 05.12.09 at 6:24 am }

Something which has not yet been widely reported is the amount of money we’ll send overseas to buy offsets – over $1.5T by 2050. See http://nearwalden.com/blog/?p=998 for details

2 Ed Reid { 05.12.09 at 7:28 am }

David Douglas,

Something else that has not been widely reported is the number of jobs we’ll send overseas, to developing countries which are still building coal-fired generating stations and intend to continue to do so.

3 Andrew { 05.12.09 at 1:11 pm }

“I fully expected proponents of Waxman-Markey to claim that households would see only modest increases in energy prices, and that faithful adherence to the emissions reductions mandated by the proposed legislation would avert serious climate change.”

They wore out their lying muscles.

4 Number Crunch { 05.12.09 at 1:12 pm }

So, are you saying that this will cost each American household approximately $120,000.00 through 2050? (Actually, that seems low with all the economic disruption and misallocation of resources this will cause.)

5 Ed Reid { 05.12.09 at 1:35 pm }

Number Crunch,

Add the ~$30 trillion which US businesses would have to invest by 2050 to actually reduce carbon emissions by 83% and you should have a more accurate number, with which you should be far less comfortable.

6 Silas Barta { 05.12.09 at 8:17 pm }

Congrats, Robert_Murphy_(Guest_Blogger)! You figured out why “unilateral disarmament” doesn’t work on this issue! (You’ll forget it as soon as you revert back to that argument you made in a journal article I can’t find at the moment. The one about “don’t worry, we can just use social pressure to get people to do economic calculation on the efficiency of their carbon emissions in the absence of market price”. But hey, gotta give credit where it’s due.)

Of course, instead of suggesting ways to get around the problem of defectors, you felt content to point to how one plan doesn’t do it, shrug your soldiers, and resign yourself to that terrible, terrible fate where coastal dwellers get displaced from their land so that your gas will stay nice and cheap.

Just out of curiosity, though, do you think you could come up with a way that an international agreement could handle the problem of defectors, if you really put your mind to it? I know I did, and it only took a few seconds.

But I guess I had a head start in that I didn’t feel obligated to prove why evicting others from land they own is morally acceptable as long as it keeps gasoline cheap. Needless to say, you don’t enjoy such a luxury.

(Cross-posted at Murphy’s personal blog.)

7 What a Cap-and-Trade Energy Bill Will Cost You, And Why You Should Care. « American Elephants { 05.13.09 at 3:34 am }

[...] and dramatically boost reliance on renewable energy. Chip Knappenberger of  Master Resource has calculated that Waxman-Markey — the Democrat led bill in congress — would at best avert 9/100ths of one [...]

8 scientella { 05.18.09 at 12:57 am }

Even if it costs each househould 10,000 per year, even if it doubles unemployment, even if it halves consumption, it’s worth it. Don’t you get it you ostriches with head in sand, this is a battle for survival, in which this a tiny first step. BY 2020 we will doing a whole lot more than this and the world will be devaztated.

9 Richard W. Fulmer { 05.25.09 at 6:22 pm }

A first step that is all pain and no gain may make a second step politically impossible.

10 Houston Chronicle: Knee-Jerk Climate Alarmism, Policy Activism w/o Economic Analysis — MasterResource { 05.27.09 at 7:16 am }

[...] in that year. And that analysis, and the bill’s estimated substantial costs, have not been refuted. Pending further review, in fact, Waxman-Markey badly flunks conventional economic cost/benefit [...]

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